Market Turn - Fewer Homebuyers Enter Bidding Wars in 2019

The housing market is slowing down in the Golden State and the nation as a whole. In California, home sales volume has declined consistently throughout 2019, with home prices just 1%-3% above a year earlier.

In yet another sign of the housing market’s slowdown, bidding wars are far less common in 2019.

Nationally, in June 2019, 12% of offers submitted by Redfin agents faced competition from at least one other offer. This is down significantly from a year earlier when 52% of offers faced competition.

Here in California, the downturn is even steeper. The percent of offers facing a bidding war as of June 2019 were at:

28% in San Francisco, down from 65% a year earlier;
19% in San Diego, down from 61% a year earlier;
14% in Los Angeles, down from 67% a year earlier;
12% in Sacramento, down from 50% a year earlier; and
6% in San Jose, down from 74% a year earlier.

One metro area in particular stands out from this list: a year ago, San Jose was the most competitive major market in the nation. Now, it’s the third least competitive with just 6% of offers seeing competition. A precipitous drop, to say the least.

Redfin’s analysis suggests homebuyers’ declining interest may soon reverse due to the continued interest rate decrease, prompting mortgage funds to be obtainable at a lower cost. That’s an enthusiastic way of looking at it — and we are far less optimistic.

Don’t expect bidding wars to return anytime soon

Most forecasters and housing experts agree: 2019 is a transition year for the housing cycle.

Home sales volume peaked in 2018 and has steadily trended downward. Similarly, home prices declined for several months at the end of 2018 and beginning of 2019, only to rebound marginally in Spring though nothing more significant than a seasonal adjustment.

While lower interest rates will increase buyer purchasing power, enabling homebuyers to qualify to purchase larger principal amounts, it will not organically create more homebuyers. Discouraged by talk of a coming recession, an unstable stock market and the growing realities of a continuing global trade war, most would-be homebuyers are thinking twice before taking on more debt — particularly debt the magnitude of a home mortgage.